Alibaba Revenue Up 9%, AI Cloud 45%, Profit Plunges 75%
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- Alibaba posted fiscal Q1 revenue of 268.95 billion yuan ($40B), up 9% year-over-year and narrowly beating the 268.88 billion yuan analyst estimate, while net income fell 75% to 10.44 billion yuan ($1.6B).
- Alibaba Cloud's external revenue growth accelerated to 45%, with AI-related product revenue reaching 12.38 billion yuan ($1.82B)—its 12th straight quarter of triple-digit year-over-year growth.
- Capital expenditure jumped 75% to 67.7 billion yuan ($10B), driven by rising chip prices and expanding compute capacity, pushing free cash flow to a $6.6 billion outflow per Bloomberg.
- U.S.-listed Alibaba shares fell as much as 5% after the open before paring losses to roughly 3.5% by midday.
- Alibaba open-sourced its Qwen 3.8-Max model earlier this month and shut down the free tier of its Qwen Code coding agent in April, shifting emphasis toward distributing models rather than just training them.
- Apple is pairing its in-house model with Alibaba's Qwen to bring Apple Intelligence to Chinese iPhones—a deal that could make Apple the first foreign company allowed to run a proprietary AI model inside China.
- Chinese open-weight models collectively jumped from under 2% of tokens generated on OpenRouter in late 2024 to roughly 61% by mid-2026, even as Alibaba's quarterly profit shrank by three-quarters.
Why it matters: Alibaba is spending $10 billion in capex—up 75%—to scale AI compute capacity, and the resulting $6.6 billion cash outflow and 75% net income collapse show investors the near-term price of winning the AI cloud race. The Apple partnership and open-weight Qwen push position Alibaba as a distribution-layer winner, but the 3.5% share drop signals the market is pricing patience, not profit.
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